NEW YORK – “Goods produced by China’s hundreds of millions of workers are a strong anchor for stabilizing global inflation” read the banner headline at China’s “Observer” (guancha.cn) website June 10, quoting People’s Bank of China official Guo Shuqing, the Communist Party representative at the central bank.
Guo dismissed the reassurances of Western central bankers and offered an alarming assessment of inflation risk: “Inflation is coming as scheduled. Moreover, the magnitude is higher than the expectations of central bankers in the United States and Europe, and the duration of inflation does not seem to be as short as many experts predict.”
He added, “When fiscal expenditures are already largely supported by the central bank’s printing of money, it is like an airplane entering tailspin, and it is difficult to pull out of the dive. Before 2008, the Fed’s balance sheet was only more than US$800 billion, and now it is nearly $8 trillion, and the ratio of US federal debt to GDP has surpassed the highest record created during World War II.”
Nonetheless, Guo argued, China can help: “For a considerable period of time, China has supplied about half of the world’s finished goods, and on the whole has not increased export prices, laying a solid foundation for global epidemic prevention and control, and for economic recovery. If the large amounts of currency issued by the most developed countries have been the driving force for global inflation, then the goods produced by China’s hundreds of millions of workers are the anchor for stabilizing global inflation.”